Canada’s main stock index inched lower on Thursday, weighed down by technology stocks and escalating geopolitical tensions between Russia and Ukraine, while retailer Canadian Tire Corp jumped on upbeat corporate earnings.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 22.83 points, or 0.11%, at 21,360.81.
Wall Street’s main indexes also opened lower, with some disappointing earnings also weighing on the mood.
The Dow Jones Industrial Average fell 75.80 points, or 0.22%, at the open to 34,858.47. The S&P 500 opened lower by 18.95 points, or 0.42%, at 4,456.06, while the Nasdaq Composite dropped 119.90 points, or 0.85%, to 14,004.19 at the opening bell.
Russian-backed separatists and Ukrainian government forces have accused each other of firing shells, sending traders to seek safety in government bonds and pushing gold prices to a new eight-month high.
The two sides traded accusations each had fired across the ceasefire line in eastern Ukraine, raising alarm at a time when Russia has massed more than 100,000 troops close to Ukraine’s borders. The West accuses Russia of preparing for an invasion, while Moscow says it is pulling back some troops and accuses Kyiv of planning an escalation to try to recapture rebel-held territory by force.
Losses on stock markets were widespread globally, though not as big as in recent sessions.
In Europe, the Euro STOXX was down 0.1% in morning trade while Britain’s FTSE 100 dropped 0.65%. Strong corporate earnings in Europe helped keep the losses in check. MSCI’s broadest index of Asia-Pacific shares eked out a 0.15% rise by the close. The MSCI world equity index, which tracks shares in 50 countries, was slightly lower on the day.
Westpac analyst Sean Callow said markets were “clearly on edge” and vulnerable since a lot of traders had assumed tension was easing.
Investors bought into government bonds. Yields on the U.S. 10-year Treasury note have slipped back below the 2% level as North American stock markets opened.
The Russia-Ukraine crisis is unnerving investors just as markets were already struggling. Investors are worried the pace of monetary policy tightening -- triggered by central banks needing to tame soaring inflation -- and a reduction in cheap cash will take more of the air out of highly valued asset prices.
Most major markets are down sharply in 2022, with the tech-heavy Nasdaq off 12%. But the TSX has been significantly outperforming thanks to its heavy weighting in energy and financial stocks; the Composite is up 0.76% year to date.
Some investors advised clients not to panic over the geopolitical crisis.
“Drawdowns driven by geopolitical stress events are typically short-lived for well-diversified portfolios,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
He added that their base case was a “relaxation of geopolitical tensions”.
Worries about a super-hawkish Fed rate-tightening campaign, potentially including a 50 basis-point hike next month, took a step down on Wednesday after minutes of the latest policy meeting signaled a more measured, data-dependent approach from central bank officials.
Meanwhile, investors are taking in more quarterly results as the earnings season starts to wind down.
Retailer Canadian Tire Corp beat Wall Street estimates for quarterly revenue this morning, as consumers splurged on sporting goods, garden equipment and home decor during the holiday season. The company’s total revenue rose to C$5.14 billion in the fourth quarter ended Jan. 1, from C$4.88 billion a year earlier, beating analysts’ average estimate of C$4.76 billion, according to IBES data from Refinitiv. The company’s A class shares on the TSX were up 5% at the opening bell.
Canadian fertilizer maker Nutrien Ltd said after the bell Wednesday that a surge in prices of potash due to robust global demand and thin supply would boost its profit in 2022. Its shares are up about 3%. The company forecast annual adjusted profit between $10.20 and $11.80 per share, above analysts’ average estimate of $9.46 per share. It declared a quarterly dividend of 48 cents per share, an increase of 4% from a year earlier, and also announced a share repurchase of up to 10% of its public float. On an adjusted basis, the company posted a profit in its latest quarter of $2.47 per share, beating estimates of $2.35 per share.
Walmart forecast full-year profit and U.S. sales above market expectations, signalling a steady demand at stores even as supply-chain issues and rampant cost inflation pressure the retail giant’s margins. Shares of the world’s largest retailer and a consumer bellwether rose 3%. Net revenue in Walmart’s fourth quarter showed a surprise 0.5 per cent increase to $152.87-billion, beating analysts’ average estimate of $151.53-billion, or a 0.4 per cent fall. The company also raised its annual dividend by 2 per cent to $2.24 per share.
Chipmaker Nvidia slid 6% as flat gross margins and concern about its exposure to the crypto market overshadowed upbeat current-quarter revenue forecast.
TripAdvisor Inc tumbled 7.7% after the hotel search website operator posted a surprise fourth-quarter loss.
Equities
Commodities
Gold prices broke higher to hit an eight-month high of $1,892 an ounce, up 1.2% on the session and helped by nervousness across markets and a weaker dollar.
Crude oil prices fell sharply but were off their lows. They had earlier tumbled more than 2% on optimism that negotiations will salvage Iran’s 2015 nuclear deal and bring more supply to a tight market.
U.S. West Texas Intermediate (WTI) crude was last down 2.1% at $91.65 a barrel, while Brent slid 1.86% to $93.05 a barrel.
Currencies and bonds
The U.S. dollar, regarded as a safe haven, initially rose against most currencies but those gains subsided and the greenback was marginally lower by wake-up time in North America - a sign investors were not yet panicking about the Russia-Ukraine tensions.
The Canadian dollar is a touch softer so far today.
The loonie only saw minor moves on Thursday as Canada’s inflation reading of 5.1%, the highest since 1991, came in slightly hotter than forecast.
“The CAD nudged marginally firmer very briefly on yesterday’s higher than expected CPI report but the negative pull from weaker crude and broader market uncertainty (the VIX dipped yesterday but has edged higher to 25.8 this morning) remains strong,” Scotiabank forex strategists said in a note today. “The inflation report reinforces the outlook for a 25 basis point hike but it was perhaps not the “smoking gun” that bolsters the case for a 1/2 point move in March.”
Bank of Canada Deputy Governor Timothy Lane, in a speech Wednesday, echoed comments from Governor Tiff Macklem that policy makers would be “nimble” in implementing policy changes and said the Bank would be “forceful” if necessary. That also suggests the bank is in no rush to tighten rates aggressively at this point, commented the Scotiabank strategists. “The CAD seems set to remain within its established 1.2650/1.28 range for now,” they said, which equates to a range between 78.12 and 79.05 cents US.
Other corporate news
Home Capital Group Inc. resumed its quarterly dividend and reported fourth-quarter earnings including growth in mortgage originations. The company said net income was $52.7-million or $1.04 per share versus $55.3-million or $1.06 a year earlier. Adjusted EPS was $1.06. The expectation was for earnings of $1.09 per share. The board declared a dividend of 15 per common share, payable on March 31 to shareholders of record at the close of business on March 15.
MTY Food Group Inc. said that its fourth-quarter revenue grew 15 per cent year-over-year to $146.3-million. The results were slightly below expectations of $147.3-million, according to S&P Capital IQ. Net profit was close to Street expectations.
Goldman Sachs on Thursday upgraded its key medium-term profit target as it provided an update on strategy and goals. The bank said it expects to achieve a return on tangible equity (RoTE) of 15-17%, compared with 14% previously.
Albemarle Corp dropped 7.9% after the lithium producer forecast downbeat annual earnings despite higher lithium prices.
Cisco Systems Inc gained 3.3% after the networking firm raised its full-year earnings forecast and announced $15 billion in share buybacks.
DoorDash Inc surged 24.9% after it reported upbeat quarterly revenue as food delivery demand showed no sign of slowing, indicating ordering habits have changed permanently.
Hasbro Inc rose 4.0% after activist investor Alta Fox Capital Management nominated five directors to the toymaker’s board and urged changes including a spinoff of its unit housing games such as “Dungeons & Dragons.”
Other earnings today include: Dream Office Real Estate Investment Trust; Dundee Precious Metals Inc.; Fairfax India Holdings Corp.; Inter Pipeline Ltd.; Lundin Mining Corp.; Richie Bros Auctioneers; Superior Plus Corp.; Yamana Gold Inc.
Economic news
The number of Americans filing new claims for jobless benefits unexpectedly rose last week, but remained at levels associated with tightening labor market conditions. Initial claims for state unemployment benefits increased 23,000 to a seasonally adjusted 248,000 for the week ended Feb. 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 219,000 applications for the latest week.
Canadian home price gains accelerated again in January, climbing 1.3% from December, on rises in nine of the 11 major markets, data showed on Thursday. The Teranet-National Bank Composite House Price Index, which tracks repeat sales of single-family homes in major Canadian markets, had climbed 0.8% in December from November. January’s jump was driven by Hamilton, Ontario, and Toronto, up 2.1% and 1.9% respectively on the month. On an annual basis, the index rose by 16.6%, up from 15.5% last month.
With files from Reuters